Ted Hsu, Liberal Critic responsible for Science and Technology, challenges the rationale behind recent changes to the SR&ED program. Hsu opines that the elimination of capital expenditure eligibility, combined with the reduction of the overall SR&ED tax credit from 20% to 15%, reduces the competitiveness of Canadian corporations internationally.
The SR&ED tax credit reduction was not one of the recommendations of Jenkin’s report, and this reduction increases the overall marginal tax rate for innovative companies. Furthermore, there is no evidence that the reinvestment of the SR&ED savings into direct grants will improve the competitiveness of Canadian corporations. There are inherent inefficiencies, and costs related to the creation of application and selection infrastructure, in order to allow government to “pick winners.”